Deciding to divorce is often one of the biggest decisions in life. Many couples wait until the kids are completely out of the house. This can extend throughout college or university years in many cases. And that, of course, can lead to years of unnecessary anguish, unhappiness, and even depression. The truth is, you don’t have to put off a divorce for the kids. In fact, your Michigan divorce lawyer can help enlighten you with up-to-the-minute regulations on how your divorce may affect your child’s financial aid. Consider the following basics to avoid worrying about the future of your children’s education after your divorce is finalized.
Do You Have a 529 Savings Plan?
In marital or family situations, one parent usually makes less money than the other. Although it’s not set in stone, the mom usually fills this spot. This is actually good news for the college-bound kid since the less money the parents make, the more financial aid the children can receive from the state and/or government. While it is a savings account, a 529 plan has serious tax incentives that can help build a nice educational nest egg over the course of a few years, let alone a lifetime. The value of the 529 must, however, be included on the Free Application for Federal Student Aid (FAFSA), and only one parent is allowed to own the plan after the divorce is finalized. So be sure to give your 529 information to your Michigan divorce lawyer to ensure tax and income breaks on your children’s FAFSA.
Who’s Claiming the Full-Time Student for Tax Purposes?
Divorcing spouses must decide which parent will claim a full-time student on their taxes each year. Any type of divorce can be challenging, not to mention stressful. Quite often, the spouses want to one-up one another and get the most they can out of the deal. But it’s crucial to stay on track and focus on your child’s future–especially when financial aid is involved. High-income earners should consider letting the lower-income earning parent claim the post-secondary student. Parents who make incomes around $180,000 are exempt from receiving college-related tax credits. So if your kids really do come first, pass this benefit over to your lower earning soon-to-be-ex.
Carefully Consider Your Custodial Decision for Your Full-Time Student
Child custody is often one of the most difficult and contentious decisions in a divorce. However, that decision can make a huge difference in the Financial Aid benefits of your full-time student. The FAFSA determines how much financial assistance is needed based on a variety of factors, including the custodial parent’s annual income. Only one parent is required to fill out the income section of the FAFSA, but it must be the custodial parent of the student in question. Understand upfront that noncustodial parent is not required to contribute to the cost of education, so be sure to take this part seriously. Michigan can allow a parent to claim their child through the age of 19.5 years as long as it’s agreed upon by both parties. Just be sure to discuss matters with your Michigan divorce attorney to ensure all legalities are cemented prior to filling out the FAFSA.